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9/29/18

Third Place: "Barrick / Randgold and a Mark Bristow quote". It was The Randick Week on the blog and while just four posts were directly related to the merger (three others semi-connected), three of those take the gold, silver and bronze position this weekend. This one got hits because what with last weekend's scoop, mainstream media decided to pay attention to the blog for a nanosecond and quote bits and pieces, this one and its "probably the start of M&A action rather than an isolated incident" got picked up.

9/28/18

The
Company is also pleased to report that it has entered into a
subscription agreement with Newcrest International Pty Ltd, a wholly
owned subsidiary of Newcrest Mining Limited (“Newcrest”) (ASX:NCM)
pursuant to which Newcrest has agreed to acquire 14,025,312 Common
Shares of Almadex by way of a non-brokered private placement at a price
of $1.36 per share for aggregate gross proceeds of $19,074,425 (the
“Private Placement”). The Private Placement will close in conjunction
with the proposed spinout transaction referred to above, subject to
customary conditions of closing including the completion of the Spin-out
transaction. Newcrest has completed its due diligence in regards to the
Private Placement. Upon completion of the Private Placement, Newcrest
will hold 19.9% of the issued shares of Almadex, and will have no
ownership interest in Spinco.

The deal went live May 18th. So congrats due to Newcrest for buying 19.9% of ex-spinco AMZ at $1.36 a share. Well done guys, starting as you mean to go on.

In the post "Garibaldi Resources (GGI.v): Ye shall know them by their fruits" we previewed the long-awaited news expected out of the company that week from its Nickel Mountain (their choice of words, not mine) project up in the GWN. In the end it didn't show that week, we had to wait another eight days but the initial drill results finally showed upon Monday morning:

Within a lick and a spit, that's 50% down in a rough week for GGI.v longs. And when the fruits showed this desk knew them, as while here at the blog other things have been happeningthe NR did get a mention over at IKN Twitter:

At the time of that Tweet it was still a $2.50 stock, by the way. Now $1.50 and it really is this simple:

Over-hyped by the pump-happy publications

A core of vociferous "true believer" holders

An over-inflated market cap

Results that cannot in any way justify the value

And please do not bother either myself or yourself again with the hackneyed and erroneous "Eric Sprott disagrees" argument without learning how the guy goes about his speculation investment first. Now maybe GGI at its mountain isn't dead yet (and if I've heard "Voisey's Bay wasn't discovered until hole 121" once, I've heard it a thousand times even though it's a total apples-to-oranges situation) but in order to revive its chances, it's going to need to find a lot more than it has so far. What really grabbed my attention is that after months of drilling using three rigs, the only thing we see in the all-important first NR are results from the same small mineralized zone as before. Whatever happened to Lightfoot's "Rivers of Magma" theory that he wowed the unaware with last year? I see no flood. When the only thing you have to offer is the same thing as before, the implications are obvious. Hope is not an valid investment thesis. Listening to theoretical geologists is almost as bad.

Finally, as for those who were roped in by the unscrupulous into this trade, they can stay in denial for as long as they want. Some people learn their lessons quickly, others need them beaten into their heads with a 4 by 2, others still never learn. We are fortunate to live in a society that allows us to do whatever we want with our hard-earned money, after all.

FWIW, a constant palladium price and a re-trace to 0.825X on the ratio (e.g. similar to the re-trace in late 2016 when the spike was similarly overbought) would indicate a gold price of U$1,318/oz, with a time window to end 2018. Food for thought.

9/27/18

In light of this afternoon's turn of events in which the SEC has filed a complaint against Elon Musk for his "going private" pronouncements that caused Tesla $TSLA shares to fly a few weeks ago, this humble corner of cyberspace offers up two items:

When one listens to the CEO of Torex Gold (TXG) during his presentation at the Denver Gold Forum, one begins to understand the reason this company has had so many community relations problems. It is clearly due to the fact that Stanford doesn't have the first clue on the subject and must antagonize the local stakeholders just by breathing. Here's his take on how to deal with locals (this link, from minute 09:10 onward) as he explains his view of the aftermath of the strike at the mine earlier this year:

"The future does not look like our past, because everybody suffered. Before that the company kind of dealt with those small incidents, the week (or two or three day blockades), but now if we're not working they don't pay the doctors, the doctors go home, we don't pay the teachers, the teachers go home, we don't pay the employees they lose their jobs, the contractors go home, nobody's buying tacos and getting their laundry done, etc etc."

My stars, what an arrogant twat. And not only that, but dead wrong as well because come December 1st when AMLO assumes, the pro-AMLO union run by Napo that Stanford stopped from entering Limon-Guajes will get busy on the company again. This time, it won't take no for an answer.

...in a shocking development, it turns out to be the way IKN described it, not the BS and nonsense waved at you by Palisade and the other paid pushers.

Eric Sprott does this September 25th Youtube interviewand it's all good fun (ty reader D for the heads-up), but to get to the point move to minute 2:40 and listen to this. The subject is the Australian Pilbara (Novo Resources etc) and here the transcript of what he has to say (author's bold type):

"Well it's very interesting that you know, I can't imagine that Canadians are greater punters than Australians are, but one of the interesting things I've found with the Pilbara is that there's this potential to have, and I'm not saying we have, but potential of billions of ounces, if you believe in the precipitation theory and it's throughout the whole Pilbara like it could be a very very large...world's largest or second largest rivaling Witwatersrand type of discovery. And maybe we're just more risk takers but we've been involved with the gold mining sector probably more than any other country, investors in Canada, so that kind of possible fairy tale answer is something we're always looking for, and there's lots of potential there with any of those companies that they could find the nest big one and lots of people in Canada are prepared to invest on the basis that, you know 'you put up X and if you're right you make ten times X and if you lose X well that's fine, that's just part of the game here', so we're prepared to do that."

Unlike those who think that he's some sort of infallible machine who
never gets them wrong, I understand how Eric Sprott approaches the
exploreco market. He knows he's going to bet on losers along the way and
has done so on umpteen occasions, he also knows that it only takes one
massive winner among a bunch of positions to justify the strategy and
come out on top.

And finishes like this:

Those of you under the impression that following Eric S into a trade is
some sort of mystic formula for guaranteed gains ought to check further,
do more DD, see for yourself. He backs failures A LOT of the time
(seriously, go look), the difference is that when he nails a winner he
makes an equal capslock A LOT of money (e.g. at least $300m in Kirkland
Lake). However, anyone that gives you the "Eric is long so this is a
winner" spiel does not know what they're talking about.

...recently after a long hiatus, which is good for us. We've had the pleasure of several posts on SolGold and Garibaldi in the last few days, with this one a resource guesstimate for the Garibaldi project out last night the best in my opinion. Go take a look.

No matter that Barrick (ABX) is buying out Randgold (GOLD) now, the previously IKN revealed process at ABX to sell its wholly owned Peru subsidiary, Misquichilca SA, is still on. The main asset in Misquichilca is of course the Lagunas Norte mine in the La Libertad region of North Peru, but there are other assets in the suite too including Pierina (or what's left of it) and some greenfield projects to boot.

The process is ongoing and the sale will be announced presently. TD Sec is doing the work for Randick. Have a nice day.

For those of you just joining us, here's the reminder of our well-documented First Law:

"The
IKN First Law of Mining News Releases: Considering that anything
contained in a mining news release is presented in the best possible way
for the company in question, any piece of information contained in a NR
that comes across in any way negative means the real news and/or events
behind it must be very, very bad indeed."

VANCOUVER, British Columbia, Sept. 26, 2018 (GLOBE NEWSWIRE) -- Trevali Mining Corporation (“Trevali” or the “Company”) (TSX: TV, OTCQX: TREVF, Frankfurt: 4TI)
announces that operations at the Santander Mine in Peru have been
temporarily halted as a result of an illegal blockade. Main road access
was temporarily blocked by a small group of community members and other
persons not affiliated with the Santander Mine, and the Company was
unable to complete a scheduled delivery of supplies. The protesters
allege that Trevali has failed to satisfy its community investment
obligations under its agreement with the Santa Cruz de Andamarca
community.

The Company has
complied with all of its contractual obligations to the community and
fully cooperated with government departments and other authorities
regarding the blockade, which has now been lifted. Necessary supplies
are now being delivered to the mine and full production is expected to
resume within the week. The Company expects that production and sales
for the quarter will be negatively impacted; however, the Company
remains on track to achieve 2018 zinc production guidance at Santander.
The Santander senior management team is proactively engaging with the
local community and is in ongoing consultation with elected community
leaders to discuss their concerns and ensure that mine operations
continue without further interruption.

“It is
unfortunate that a small group of individuals chose to act in this
manner instead of through open dialogue,” said Mark Cruise, President
& CEO of Trevali. “We have enjoyed tremendous support from the local
communities at Santander over the years and will continue to work
diligently with the community to strengthen our commitment to a mutually
beneficial relationship.”

Now let us consider the things that Trevali didn't tell you in that NR:

First consider the use of the word "temporarily" in paragraph one, with no dates or specific time periods mentioned. That's what comes of putting a NR through your Community Relations, then Investor Relations, then Legal department before it gets signed off by the C-suite.In fact this "temporary blockade" has been going on since August 24thand the road has been blocked by locals all that time.

Something else that Trevali didn't tell you was that on September 3rd they called in the heavy mob. On that day a group of 20 police officers showed up and beat the blockade protesters with their batons. Nine people were injured, including women and children. The lawyer representing the locals told local media that Trevali had hired the group of officers on a private contract to go in and do the dirty work in order to get the road back open. The lawyer also said that the police who repressed the protest are the same officers hired by Trevali on a regular basis to provide on-site security. However, even after getting beaten up the locals didn't give up and kept the blockade in place afterwards.

Another week has gone by and still no news about an investigation over the clear-cut case of use of non-public material information (i.e. illegal insider trading) by Lundin Mining's director Paul McRae. Wehave had no declaration from Lundin Mining
(LUN.to) on whether McRae is under investigation for the blatant breaking of its ethics rules. We have heard nothing from Canadian regulatory authorities, BCSC, OSC, IIROC, TSX etc.

Why is that? Are these people trying to cover up YET ANOTHER case of insider trading and hoping it will simply go away? Is Lukas Lundin trying to protect a friend instead of doing the right thing? Inquiring minds, etc...

9/25/18

Here's how it happened. Yesterday I get this mail out the blue, let's go with the initials "GD", who asked me to take a look at his new website small business. He explained that it started not long ago, sells mugs for your coffee/tea/etc and all with a financials sector angle. I went over, had a look and he'd clearly done a nice job (way better website than clunky old 1.0 IKN here, for example).

So I asked him for more details. GD tells me he's a young guy just starting off in the capital markets profession (he has a job in a company in the industry) and put together this idea to earn some extra cash, as start-up salaries are tight and he needs to make ends meet. That I thought was very cool. GD went on to say he's sold about 500 units so far, which means the idea is working and the logistics are sorted out, too. We get to the point: He asked me whether I could help get the word out about his business in exchange for some sort of deal, e.g. 10% of sales generated by IKN. That was also appreciated, but it's not necessary and I'd much rather do this for free (FWIW we came to a final loose agreement that if I manage to get him a bunch of sales GD would send me a freebie mug, that's something I can accept happily enough but there's no way I'm encroaching on his biz here). Therefore, we roll out the IKN approved blurb and here we go:

You then get to scroll down, start checking the merchandise (or "merch" as you cool young people say) and as there are 31 different designs, you're bound to find something that tickles your fancy. Here are three to give you an idea.

The Barrick/Randgold (and if we can get "Bristow's Randick" into common usage the world would be a sunnier place) is being mooted in many corners as a catalyst for a new raft of M&A activity among the larger caps. Quite right too, it was my first reaction when hearing the news on Saturday (you heard Monday :-)).

But what companies are now in-play? Well for me, two stick out like proverbial sore thumbs.

1) B2Gold (BTG) (BTO.to): Way too cheap for what it is, the market has been leery due to its large debt book but now Fekola has become a major cash cow, that will drop quickly. And a major won't fret about adding a billion to its liabilities for a year when it's also adding nearly a million ounces of very profitable production at the same time (or 800k if The Clive spins out the Nica gigs). Cheap as chips right now, ready for a re-rate.

2) Alamos Gold (AGI.to) (AGI): This for a different reason, the big options volumes that AGI has been doing recently suggest an interloper. The wrinkle here is that McCluskey is an entrenched asshole and the only way of getting AGI out of his grasp is via a hostile bid. They aren't normally successful in the mining world. AGI may become a target soon, but the outcome is less certain.

From out of the blue and for "personal reasons", Luis Caputo has just announced his resignation as president of the Argentina Central Bank (BCRA). Not only is the substance surprising, but the style too because the announcement came...

literally minutes before the market opened

on the day Argentina sees a high-profile national strike protesting its government's policies that has brought the country to a standstill

while President Mauricio Macri is in New York at the UN Assembly

Then again, weird crap is the norm for the basket case country. The Argentina Peso dumped 3.2% at the open on this news.

It was interesting to watch the way New Gold (NGD) traded yesterday, dumping 15% and removing all the premium priced into the stock the day Renaud Adams was announced new CEO. On the subject, here's the short note we ran on NGD in IKN487, out last Sunday evening (before yesterday's dump, which doesn't appear on the price chart here):

Last week at this point we ran the
note “New Gold (NGD) will sell Mesquite”
and this week the only thing that changes is the verb tense. On Wednesday September
19th, New Gold (NGD) announced (38) that it was indeed selling Mesquite and the buyer was
one of the three we outlined as prospective, Equinox Gold (EQX.v). Therefore we
got the sale right, the asset right and even pointed a finger at the right
buyer. However, my assumption that NGD would want book value for Mesquite was a big
mistake because the selling price is U$158m cash.

That compares to the U$386m
carry that Mesquite
has on the NGD (here’s that chart from last week again, but don’t worry I’m not
going to repeat any others) and leaves a U$228m hole in its balance sheet. Or I
should probably say another hole, because along with the over-priced Blackwater
and the faltering Rainy
River, I’m certain the
company will have to take more impairments under the new stewardship of Renaud
Adams. Here’s how the NGD stock reacted to the news of the sale:

Down 13.5% in the last two days of
trading and 4% down on the week, despite the positive macro for mining stocks
and its own early week rally.

It was the price agreed by NGD that
hit the stock hardest, because although the cash (when it arrives Q4) will be
very useful in paying down part of its welter debt burden, it wasn’t as much as
I or most of the market expected (I’ll admit in hindsight I assumed too high,
but not this low) and moreover, the speed and size of the deal smacks of
desperation on the part of NGD, which in turn suggests Rainy River is in worse
shape than expected (we’ll find out more in the Q3 production numbers, of
course).

If and when NGD can do a deal to
sell Blackwater, it may be worth revisiting this stock. Until then it’s an easy
pass and on that, I think back to the piece I wrote on NGD in IKN453, dated
January 21st 2018. It was entitled “New Gold (NGD): Cannot get
comfortable” and at just under two pages of script, just about the shortest
fundies analysis note I’ve ever written on a stock for the main “Fundamentals…”
section of The IKN Weekly. After being prompted to look at the stock again on
its 4q17 numbers, I was at first enthusiastic about revisiting NGD but as the
numbercrunch went on, it became apparent that the company was still in serious
financial trouble. I passed on the stock and wrote the short note that I’ve
re-printed in Appendix 1 below. It was a U$3 stock at the time. Good call.

9/24/18

Marcelo Kim, the same guy that criticizes the rest of the mining industry from his perch as chairman of the most laughable junior exploreco of the lot, International Tower Hill (ITH.to)? Is that really you being the manly man doing man things in a way that men are men, Marcelo Kim?

Please tell the audience in Denver today that it isn't you, Marcelo. Please.....

We know that the geologists on-site knew about the threats, because they told their own family members on many occasions and over many days while there (up to two weeks of messages). We also know from the father of one of the dead geologists that the company was "monitoring the situation" but did nothing. We also know that after the event, CNL issued a statement saying (translated from this screenshot),

"No direct threats were received by the company in the municipality of Yarumal".

That means Wednesday September 19th , the day before the tragic events at the camp.

In other words, CNL told us that there were no threats to the company but at the same time they had decided to pull out their team. That they also waited until it was too almost late to do so and then did not act on that very same Wednesday is also a tragedy and part of the problem, but that's a side issue today. What matters is that CNL is already contradicting itself on what it knew. Therefore CNL, as requested last weekend and due to your apparent desire to clarify the facts of the case, will you please clarify the key issues instead of dancing around them:

Regarding the ABX/GOLD hook-up, a fine and upstanding mailpal reminded this desk of a Mark Bristow quote from a couple of years ago:

“If you mix shit and ice cream, you do not end up with ice cream”.

Maybe he'd like to reflect on his own words (or is he too busy picking out furniture for his new Toronto corner office?).

More seriously; This is good news for the mining industry, a bigboy M&A deal like this should shake up the long-dormant sector a little and get some interest from the higher levels of financial moving and shaking. Long overdue, so expect this Barrick Randgold (Randick, anyone?) to be the start of things, not an isolated incident.

The Boards of Barrick Gold Corporation ("Barrick") and
Randgold Resources Limited ("Randgold") are pleased to announce that
they have reached agreement on the terms of a recommended
share-for-share merger of Barrick and Randgold (the "Merger") to create
an industry-leading gold company. It is intended that the Merger will
be implemented by means of a court-sanctioned scheme of arrangement of
Randgold and the Randgold Shareholders under Article 125 of the
Companies (Jersey) Law 1991, with the entire issued and to be issued
share capital of Randgold being acquired by Barrick.

Under the terms of the Merger, each Randgold Shareholder will receive:

6.1280 New Barrick Shares for each Randgold Share

This exchange ratio (the "Exchange Ratio") has been agreed
based on the volume-weighted average prices of Barrick Shares traded on
NYSE, and Randgold ADSs traded on NASDAQ, respectively, over the 20
trading days ended on 21 September 2018 (being the last business day
before this announcement).

Following completion of the Merger, Barrick Shareholders
will own approximately 66.6 per cent. and Randgold Shareholders will
own approximately 33.4 per cent. of the New Barrick Group on a
fully-diluted basis.

Under the terms of the Merger, Barrick and Randgold have agreed that:

· Randgold Shareholders will
be entitled to receive a Randgold dividend for the 2018 financial year
of USD 2.00 per Randgold Share, subject to approval of the Board of
Randgold (the "Randgold Permitted Dividend"). The Randgold Permitted
Dividend is expected to be declared on or before the Effective Date,
payable to Randgold Shareholders on or around the Effective Date by
reference to the Scheme Record Time; and

· subject to the
discretion of the Barrick Board with respect to the declaration of
dividends, Barrick Shareholders will receive a total 2018 annualized
dividend of up to USD 0.14 per Barrick Share. A Barrick quarterly
dividend of: (i) up to USD 0.03 per Barrick Share will be paid for the
three month period ending 30 September 2018; and (ii) up to USD 0.05 per
Barrick Share (with a record date prior to the Effective Date) will be
paid for the three month period ending 31 December 2018, in each case
if, as and when declared by the Board of Barrick (together, the "Barrick
Permitted Dividends").

Following completion of the Merger, Randgold Shareholders
will be entitled to receive and retain any Barrick dividends with a
record date after the Effective Date. The New Barrick Group intends to
grow its dividend from the Barrick level for the financial year ended 31
December 2018 over time, underpinned by stronger cash flow generation,
additional overhead cost savings, asset sale proceeds and lower interest
costs.

Further details of the arrangements in respect of dividends are set out in section 3 (Dividends) below.

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